USD/CAD: CAD is gaining strength, while USD is slightly depressed

analytics5eb512d67428e.jpg

At the end of this week, the Canadian dollar has no reason to be sad: experts predict that the “loonie” will rise. However the US currency in the USD/CAD pair cannot boast of such optimism: it is under pressure from disappointing economic data.

Some imbalance in the USD/CAD pair is taking place against the backdrop of a global rise in US and European stock indices. Many investors are optimistic about the continuous weakening of quarantine measures in the United States and look forward to similar in Europe. However, what’s worse was information on the American labor market.

As a result, experts are alarmed by the ever-increasing number of initial (i.e.new) unemployment benefits in the United States. It can be recalled that the number of unemployed in the United States continued to increase last week. As a result, an array of citizens applying for unemployment benefits reached 3.1 million people, and analysts say that this is not the limit. According to preliminary estimates, the US economy may miss 35 million jobs. Experts emphasize that this was not observed either during the global financial crisis of 2008, or during the Great Depression of the 30s of the last century.

Economists also fear massive job cuts in the US (presumably by 21.853 million after falling by 701 thousand in March). At the same time, the unemployment rate in America can increase rapidly by 14% compared with 4.4%. In case of deterioration of statistical data, analysts are ready for the next round of sales in the US stock market. Experts are sure that this will increase domestic demand for the dollar and lead to a fall in commodity currencies, in particular, the Canadian currency.

The current situation does not add positivity to the American currency. The dollar, maintaining its current position, periodically drops. Such a “swing” negatively affects the dynamics of the dollar paired with the Canadian currency. On Thursday, May 7, the USD/CAD pair moved around the range between 1.4018 – 1.4019. According to analysts, the short-term support level for the “loonie” was the level of 1.4015. On the morning of Friday, May 8, the USD/CAD pair plunged sharply down to 1.3942 – 1.3943. Later, the pair tried to return to the “green” zone, but these rises were temporary.

One of the important factors determining the further dynamics of the Canadian dollar will be information on the labor market over the past month. Experts are sure that if the April data is positive, the loonies will strengthen. However, there are few reasons for optimism: in March this year, the Canadian economy lost 1 million jobs, and according to experts, the situation worsened in April. According to preliminary estimates, a decline of 4 million jobs is expected over the past month. If this scenario is implemented, analysts are sure that the Canadian dollar will not escape a bearish spiral. According to them, the growth of unemployment has always been extremely negatively reflected in the dynamics of the Canadian dollar.

Nevertheless, the market does not lose hope for a gradual rise of the “loonie”. It can be recalled that CAD was considered the most successful currency G10 in 2019, however, it plummeted by 8% at the beginning of this year. The cause was the pandemic of the COVID-19 pandemic and the ensuing increase in deaths and the collapse of the economy. As a result, many investors fear the long and devastating impact of the pandemic on the Canadian economy, which is highly dependent on trade. Economic prospects Maple leaf countries look bleak due to collapse in oil prices. It can be recalled that black gold is one of the country’s main export products. In this regard, the Canadian dollar is a commodity currency, the dynamics of which depend on the hydrocarbon market.

However, economists are paying attention to the possible increase in oil prices and the recovery of the global economy. These factors in the medium-term will provide invaluable support to the Canadian economy and national currency. According to analysts, the USD/CAD pair is in a positive trend at the moment, which gives a chance to strengthen the Canadian dollar.

The material has been provided by InstaForex Company – www.instaforex.com

Source:: USD/CAD: CAD is gaining strength, while USD is slightly depressed

About the Author
InstaForex brand was created in 2007 and at the moment it’s a top choice of more than 2,000,000 traders. More than 1,000 clients open accounts with InstaForex every day. All InstaForex clients get great opportunities for effective trading on the forex market, as well as on-time technical and customer support

Related Posts

Leave a Reply

*